What was 2022 for a year for e-commerce?
Sander: “The ‘hosanna’ is defintely over.”
Wiebe: ”The sales spike of the Covid-19 pandemic is over. That in itself caused many e-commerce businesses trouble or halted their growth ambitions.”
What were the main challenges for e-commerce businesses in 2022?
Wiebe: “Uncertainty among consumers. The e-commerce market is subject to consumer confidence. With rising inflation and an energy crisis at the same time, there were significant worries for both B2B as B2C companies.”
Sander: “The inflation percentages are coming down again, fortunately.”
Wiebe: “Still, there is uncertainty in the supply chains because of the threat of potential lockdowns in China. Nonetheless, I expect that we will see more stable supply chains when that uncertainty goes. An indication already underway is that the container prices have recently dropped significantly.”
Did Optiply experience similar challenges?
Sander: “Just as all businesses we were – and are – impacted by events and trends in the market. Some of them are very macro-economic but it always trickles down to the decision-making of our clients.”
Wiebe: “For many organisations, there was the uncertainty that suppliers could suddenly pass on higher costs. This was reflected in the decisions companies make, and yes, that also affects whether companies do business with us.”
Is there reason to believe things are on the way up?
Wiebe: “Things are stabilising again. In the first quarter of 2022 online purchases dropped by almost 20% compared to 2021. However, in the third quarter that was already down to just -6%. It is a sort of rebalancing that we can build upon.”
Sander: “Sorry to say but I am quite sure we have not seen the end of the energy crisis yet. We might have survived this winter, but next winter (‘23/’24) will be trickier.”
Why is that?
Sander: “All the big deals, such as those made with the Middle East are for 2025 or 2026. Besides that, we are now also benefiting from less Chinese gas consumption. However, next winter it will likely be more difficult in terms of supply.”
Wiebe: “Is this not a little bit too macro-economic?”
Sander: “Well, it will impact both businesses and consumers. The gas price could go through the roof next winter. People have reason to be worried about that.”
Wiebe: “To be honest, I do not think it will impact consumer confidence and spending much. If I look at the numbers, in 2022 there was only 0,2% overall economic shrinkage (in the Netherlands) compared to the previous year. I understand that people are concerned about the price of gas, but we are also experiencing growing consumer confidence at the moment. In addition, the agreed price cap for gas will only enhance that confidence.”
Sander: “I am moderately positive. Let me put it like that. The thing is, we had virtually no competition from China last year. That is the main reason why the next winter will be so difficult.”
Do you expect more challenges in 2023?
Sander: “There are a couple of factors that play a role. Firstly, what will happen in Ukraine? If peace comes in January, it will have a major impact on Europe and the gas price. But that’s something no one can predict. Secondly, will China remain open? If that happens, the supply chains will stabilise further. However, if they continue to be unpredictable, we can expect problems. See it like this: closing China is good for the gas price but bad for the supply chain. Opening China entirely is good for supply chains but bad for gas prices.“
Wiebe: “You already see a policy emerging in China whereby things simply have to remain ‘open’ because of widespread protesting. I do not think they are shutting down production anytime soon and that could stabilise production and prices for trade.”
Sander: “Well, let’s face it. Even if peace comes in January, gas prices will continue to rise. This remains a macro-economic story but that is also where it all starts.”
“I am moderately positive. Let me put it like that. The thing is, we had virtually no competition from China last year. That is the main reason why the next winter will be so difficult.”
What about inflation?
Wiebe: “The cost crisis is all about inflation. One half is about energy costs going up and the other half is about the knock-on costs of energy resulting in higher prices of goods and services. It may sound exaggerated but you see that the inflation is stabilising and that means confidence in the energy market.”
And the forecasted recession?
Sander: “Recession sounds like doom and gloom but is nothing more than two or more quarters of economic shrinkage.”
Wiebe: “That is right. I think we are going into recession and e-commerce will be affected by that. Remember that e-commerce is growing at around 8 to 10 per cent per year, so even if there is shrinkage, the growth line levels off slightly. However, I do not believe the industry as a whole will take a big hit.”
Maybe not the industry as a whole but perhaps certain size e-commerce businesses will suffer more than others?
Sander: “Let me put it this way, and this is not based on numbers but on feeling – (dangerous territory for a data-driven business!) – I am seeing small players that only set up in the past four years going under. They have only experienced growth and forgot to lay the foundations necessary to cope with the flattening or contraction of the market. However, medium-sized companies are taking bigger steps because the foundation of their company is already there. They can scale up.”
Wiebe: “There will also be a split between industries. Consumers will go for necessities first and are likely to be more focused on the pricing of products. Think of pharmacy and health products are likely less impacted by a change in spending behaviour from consumers. On the flip side, big purchases will have to wait another year. We also explain this in our blog about purchasing challenges and opportunities for 2023.”
What is the advice for Optiply’s customers?
Sander: “It starts with the fact that logistics processes provide benefits if you carry them out on a larger scale. As a company, you naturally try to find a compromise between being ‘lean’ and using your economies of scale. Large corporates struggle with being flexible or lean and the much smaller businesses lack the scale to do certain things like implementing automation. With the larger SMEs, you see that they do it very efficiently and that an integration of Optiply can be done quickly. Those companies will also have an opportunity to scale up because the smaller companies around them will go under or be ripe for acquisition.”
Wiebe: “Is that not also our tip? Try to organise your business as flexibly as possible. You want the costs within your company to be aligned to your growth and not fixed or upfront.”
Sander: “It comes down to flexibility and being agile. Especially now with the staffing problems that businesses face.”
“Try to organise your business as flexibly as possible. You want the costs within your company to be aligned to your growth and not fixed or upfront.”
Are we seeing here another challenge for 2023?
Wiebe: “The shortages in staff remain an issue. Certainly for warehouse staff and shop staff.”
Sander: “The big trend is of course ageing. We are now at a peak with people retiring. That is why automation is a key solution for many businesses.”
Wiebe: “Certainly in warehouses. Businesses must be smarter in everything and ensure that their productivity goes up – for all business units.”
Has there been a change in how Optiply approaches clients since the start of 2022?
Wiebe: “We now understand much better who Optiply’s core customers are.”
Sander: “We thought in 2022 that we had our customer levels under control but that turned out not to be the case, so we started looking for a solution.”
Wiebe: “We made a major professionalisation move in 2022, especially on the Sales and Customer Success side. For us it is like any other company – you push hard, hit a ceiling, get a few things right and – if all goes well – can continue to grow. That is also the moment many businesses start making important decisions to push through a ceiling, for example, to integrate our Optiply app in their purchasing processes.“
Sander: “After a few turbulent years the e-commerce branch is entering much more stable waters. For that reason, I have the impression that Optiply will continue to grow in 2023.”